Financial literacy is a skill that helps you handle your money well. It involves making the right decisions, understanding due dates, and understanding how financial institutions work. It’s also a lifelong skill. In the modern world, this knowledge is essential. Whether you’re in your 20s or your 60s, you’ll want to make sure that you understand the basics so that you can make informed decisions about your money.
You’ve probably heard of the emergency fund, but you may not have a clue how to use it. Emergency funds are one of the simplest ways to handle money emergencies. Understanding your paycheck and taxes is another key piece of basic finance knowledge. You should also understand your social security and medicare benefits. These are important to understand if you’re working for yourself. You might even find this book helpful when managing your money, whether it’s for an emergency fund or paying off a credit card.
When you take a finance course, you’ll learn the fundamentals of financial management. The course also teaches students about different forms of business and what a financial manager’s job is all about. In addition to financial ratios and financial statements, you’ll learn how to allocate capital over time. The course is designed to lay the foundation for a future career in finance.
Basic financial knowledge also enables managers to make informed decisions. The results of finance studies show that people with financial literacy earn higher returns on investments, and also invest in more complex assets. This has important implications for the distribution of wealth. Lusardi, Michaud, and Mitchell (2017) found that financial literacy explains 30 to 40% of the US wealth gap.